Sandra W. Reed: Don’t mess up your estate plan, or how to avoid fouling up your children

Many Ways to Mess Up; Equal Number to Avoid

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your life planning questions.

If there are 50 ways to leave your lover, there are at least that many ways to mess up your estate plan and foul up your children or whomever are your beneficiaries. Consider a father’s intentions gone wrong.

Chester was the model father who always treated his three children equally. He set up a savings account for each one at birth and deposited equal amounts into them monthly. On the 16th birthday, he gave each child a car of equivalent value.

After their mother died, he revised his will, intending to leave each child one-third of his estate. When Chester died, however, his children’s feelings were not only hurt, but their financial futures also were seriously impacted by vastly disproportionate distributions to each child. How did Chester go wrong and how can you avoid Chester’s mistakes?

Don’t Forget to Take into Account Non-Testamentary Assets

Many assets, such as retirement accounts, insurance policies, investment and bank accounts pass upon death through beneficiary designations or rights or survivorship. These assets often make up the bulk of the decedent’s estate. Don’t forget to consider the impact of these assets on your estate plan and take the distribution of these assets into account in drafting your will.

Here’s what happened to Chester. He had set up his retirement account shortly after his first son was born. He had named his wife as the primary beneficiary on the account and his newly born son as the secondary beneficiary. Then he promptly forgot about the beneficiary designation, which he neglected to change when the other children were born.

The entire remaining retirement account, which constituted more than one-half the total value of his property he had at death, went to the eldest son, to the exclusion of the other two children.

Avoid or Frequently Review Specific Bequests in Your Will

It pays to be cautious with specific bequests. Chester made a major mistake with one. He had accumulated a coin collection of substantial value as a hobby. He made a specific bequest in his will of the collection, to be divided equally among the three children.

Chester frequented coin shows as part of his hobby and one Saturday, shortly before he died suddenly of a heart attack, a fellow collector made him an offer he couldn’t refuse and he sold the collection.

Chester deposited the money from the sale into a bank account to which he had added his daughter, the most responsible child, as a joint owner. He had intended this as a convenience that would allow his daughter to pay his bills if he became incapable. His theory was that this was cheaper than having his attorney draft the papers required to set up a financial power of attorney.

Chester failed to realize the significance of checking the box on the signature card that made the account a joint one with rights of survivorship. When Chester died, the entire account, including the proceeds of the coin collection sale, went to his daughter.

What about the specific bequest of the coin collection? Couldn’t the executor of Chester’s estate presume that Chester intended the value of that collection to be divided equally among the children and divide the estate accordingly? The answer is no. If the property subject to a specific bequest in a will is no longer owned at death in the sane form as in the specific bequest, that provision in the will is void. It is as if the bequest had never been made. The executor cannot make compensating distributions to take that voided provision into account.

Make Certain Will Reflects Your Intent

Chester left the residuary (meaning all the rest) of his estate “to my surviving children.” In Chester’s case, all three of Chester’s children were living when he died, so his intent that the children share equally was carried out. But suppose one of the children had predeceased Chester. Would he have really wanted his residuary estate to be divided equally between the two living children with nothing left to his two surviving grandchildren, who are the children of the deceased child?

Maybe. But, if he wanted the grandchildren to take the share of the dead child, he should have so stated. The language he actually used in the will thwarted that intent.

Make Adequate Provisions for a Minor or Disabled Child

Chester’s will made no provision in case a minor child were to receive property under the will. This presented no problem in his case since his children were adults at his death. What if he and his wife had died in a car accident while one or more of their children were still minors? If property is to be distributed to a minor, the probate court will appoint a guardian, a trustee or a conservator and the person may not be one the testator would have wanted. It might even be that detested son-in-law!  In addition to that unpleasant result, the procedure is going to add significant expense which will be charged to the estate and, consequently, lost to the beneficiaries.

Chester could have avoided this problem by stating in the will that, if any distribution under the will is made to a minor, the property passes to a custodian under the Texas Uniform Transfers to Minors Act (TUTMA). (Texas Property Code §141.001 , et seq.).  Chester could have named the person he wanted as custodian in that case or he could have granted his executor the authority to appoint the custodian. Under TUTMA, the custodian would have held the property on behalf of the minor until the minor turned 21, at which time it would have been distributed to him or her.

Sandra W. Reed is an attorney practicing in Glen Rose, of counsel with the Fort Worth elder law firm of Katten & Benson.  Phone: 254-797-0211;  email:  swreeto



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